IMF and Kazakhstan, Fixing Sovereign Debt in Unison

The IMF released its long-awaited paper on sovereign debt contract reform, advocating single-tier aggregated collective action (majority amendment) clauses and a clarification of the pari passu clause to preclude its future use to block payments on restrutured bonds, a la NML v. Argentina. An accessible summary of key points per IMF GC Sean Hagan is here. The recommendations were coordinated with ICMA (whose reform proposal is discussed here and here), as well as wealthy and emerging market governments.

Somewhat miraculously, Kazakhstan just issued a bond where it adopted the bulk of ICMA recommendations, which also puts it in line with the IMF's hot-off-the-press policy. The miracle is both in the issuer and in the timing. Kazakhstan's bond had been stop-and-go for some time (not the place one might expect experimentation). Moreover, the last time the IMF and its major shareholders advocated contract reform, it took YEARS for the first mover to emerge (Mexico). To be sure, first mover is no market shift, but a huge deal nonetheless.

I will have more on the whole subject of debt restructuring reform later, but for now, I just wonder why it was so hard the last time, and so not-nearly-as-hard this time. Is it that the market finally learned that CACs are an innocuous voting device, not the Trojan Horse of default? Is it that the Argentina mess has finally focused the minds? Is it that Kazakhstan balanced the new CACs with concessions to the creditors? Is it that none of it matters? Or that the relevant characters--government debtors, government creditors, market participants, lawyers, international organizations, and trade groups--have finally figured out how to work together?

Still thinking about the possibilities, but in all, indubitably a good thing.